The ACIT, Circle-2, Bhavnagar V. Shri Shailesh Kantilal Diora, Bhavnagar

ITA 533/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0049 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R POPAT
• Assessee Lawyers: JAMES KURIEN
• Keywords: Unexplained investment; Earning of tax free income; Additional evidence
• Section: 44AD; 143(3); 142(1); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV,JM & SHRI MANISH BORAD, AM. ITA NO. 161/AHD/2012 ASST. YEAR: 2009-09 SHAILESH KANTILAL DIORA, PARAS SOCIETY, PALITANA, BHAVNAGAR VS. ACIT, CIRCLE-2, BHAVNAGAR. APPELLANT RESPONDENT PAN ACOPD 6530C AND ITA NO. 533/AHD/2012 ASST. YEAR: 2009-09 ACIT, CIRCLE-2, BHAVNAGAR. VS. SHAILESH KANTILAL DIORA, PARAS SOCIETY, PALITANA, BHAVNAGAR APPELLANT RESPONDENT APPELLANT BY SHRI B. R. POPAT, AR RESPONDENT BY SHRI JAMES KURIEN, SR. DR DATE OF HEARING: 27/9/2016 DATE OF PRONOUNCEMENT: 11/11/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE CROSS APPEALS BY ASSESSEE AND REVENUE FOR AS ST. YEAR 2008-09 ARE DIRECTED AGAINST THE ORDER OF LD. CIT( A) XX, AHMEDABAD, DATED 9.12.2011 VIDE APPEAL NO.CIT(A)-XX /476/10-11 ARISING OUT OF ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 22.12.2010 BY ACIT, CIRCLE-2, BHAVNAGAR. ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 2 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL RUNNING THREE PROPRIETARY CONCERNS AND ENGAGED IN THE BUSIN ESS OF CONSTRUCTION AND UNDERTOOK CERTAIN PROJECTS DURING THE YEAR. RETURN OF INCOME WAS FILED ON 15.07.2008 DECLARING TOTAL INCO ME AT RS.9,45,790/-. CASE WAS SELECTED FOR SCRUTINY AND N OTICE U/S 143(2) OF THE ACT FOLLOWED BY NOTICE U/S 142(1) OF THE ACT . NECESSARY DETAILS WERE CALLED FOR AND WRITTEN SUBMISSIONS WERE FILED AND BOOKS OF ACCOUNTS PRODUCED. INCOME WAS ASSESSED AT RS.1,37,0 1,455/- AFTER MAKING ADDITION OF RS.1,27,35,355/-. ASSESSEE GOT P ART SUCCESS IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. AGGRIEVED, ASSESSEE AND REVENUE BOTH ARE IN APPE AL BEFORE THE TRIBUNAL. 4. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO.161 /AHD/2012 RAISING TWO ISSUES AGAINST CIT(A)S ORDER (A) CONFI RMING ADDITION OF RS.5,00,000/- MADE BY ASSESSING OFFICER BY INVOKING SECTION 68 OF THE ACT AND (B) CONFIRMING DISALLOWANCE OF RS.15,42 ,771/- MADE U/S 14A OF THE ACT R.W.R. 8D OF THE IT RULES, 1962(IN S HORT THE RULES). 5. AS REGARDS GROUND NO.1 WHEREIN ASSESSEE IS AGGRI EVED WITH THE CIT(A)S ORDER CONFIRMING ADDITION OF RS.5,00,000/- MADE BY LD. ASSESSING OFFICER U/S 68 OF THE ACT. LD. AR SUBMITT ED THAT THE ASSESSEE MADE PAYMENT OF RS.5,60,500/- WAY BACK BEF ORE 15 YEARS FOR ACQUIRING RIGHTS FOR A PIECE OF LAND SITUATED A T S.NO.45, HISSA NO.23 ADMEASURING 2350 SQ.M. SITUATED AT NANDIVALI GAM IN ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 3 DOMBIVALI (EAST) OF DISTRICT THANE IN THE STATE OF MAHARASHTRA. THIS SUM OF RS.5,60,500/- WAS VERY MUCH REFLECTED UNDER THE ACCOUNT HEAD LAND AT SURVEY NO.45 IN THE BOOKS OF ACCOUNT AND REGULARLY BEING CARRIED FORWARD FOR LAST SO MANY YEARS. THE R IGHTS OF THIS PIECE OF LAND WERE TO BE ACQUIRED FROM ONE MOHAN KRUSHNA BHOIRE TO WHOM PAYMENT WAS MADE AT THAT RELEVANT POINT OF TIME. 6. LD. AR FURTHER SUBMITTED THAT DUE TO CERTAIN LIT IGATION IN CONNECTION WITH THIS PIECE OF LAND ASSESSEE WAS NOT IN A POSSESSION TO GET THE CONVEYANCE DEED REGISTERED IN HIS NAME. IN THE F.Y. RELEVANT TO ASST. YEAR 2008-09 ASSESSEE ACCORDINGLY DEEMED IT NECESSARY TO GET ALL THE RIGHTS OF THIS PLOT BUT WA S UNABLE TO RECOVER FROM THE LAND OWNER AND THEREAFTER EFFORTS WERE MAD E WITH ONE CONCERN M/S PANNA ENTERPRISE WHO AGREED TO TAKE OVE R THE RIGHTS OVER THE SAID PLOT AND PAID RS.5,00,000/- BY WAY OF TWO ACCOUNT PAYEE CHEQUES OF RS.2,50,000/- EACH. HOWEVER, SINCE THE TRANSACTIONS WERE CARRIED OUT WITH M/S PANNA ENTERP RISE, IT WAS ONLY IN THE STAGE OF NEGOTIATION AND WAS YET TO TAKE FIN AL SHAPE NET LOSS OF RS.60,500/- AMOUNT PAID (RS.5,60,500/- - RS.5,00,00 0) WAS NOT CLAIMED AS LOSS IN THE INCOME TAX RETURN. 7. LD. AR FURTHER SUBMITTED THAT LD. ASSESSING OFF ICER ERRED IN INVOKING PROVISIONS OF SECTION 68 OF THE ACT EVEN W HEN THE IMPUGNED AMOUNT WAS RECEIVED BY ACCOUNT PAYEE CHEQUES ALONG WITH COVERING LETTER GIVEN BY M/S PANNA ENTERPRISE AND ALSO LD. A SSESSING OFFICER IGNORED THE FACT THAT ASSESSEE HAS BEEN REGULARLY S HOWING ADVANCE ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 4 OF RS.5,60,500/- IN ITS BALANCE SHEET ATTACHED WITH THE RETURN OF INCOME. 8. ON THE OTHER HAND, LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF LD. CIT(A) WHEREIN GROUND OF THE ASSES SEE WAS DISMISSED BY OBSERVING AS FOLLOWS :- 4.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A . R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER. AS SEEN FROM PARA-6 OF THE ASSESSMENT ORDER, AO OBSERVED THAT TH E SUM OF RS.5 LAKHS WAS FOUND CREDITED IN THE BANK ACCOUNT OF THE APPELLANT . THE EXPLANATION FILED BY THE APPELLANT WAS CRYPTIC AND WITHOUT ANY SUPPORTING EV IDENCE. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS CONTENDED THAT THE SA ID SUM WAS RECEIVED FROM M/S. PANNA ENTERPRISE TOWARDS THE SETTLEMENT OF RIG HTS OVER THE DISPUTED LAND. IN SUPPORT THEREOF, LETTER DATED 10-01-2011 FROM PANNA ENTERPRISE CONFIRMING THE PAYMENT OF SAID AMOUNT WAS FILED. HOWEVER, APPELLAN T FAILED TO EXPLAIN AS TO WHY THE SAID EXPLANATION/EVIDENCE WAS NOT FURNISHED BEF ORE THE AO. AS SEEN FROM THE WRITTEN SUBMISSIONS FILED, NO REQUEST HAS BEEN MADE FOR ADM ISSION OF ADDITIONAL EVIDENCE ON THIS ISSUE. THEREFORE, I AM OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR. THIS GROUND OF APPEAL IS DISMISSED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVED WITH THE ORDER OF CIT(A) CONFIRMING THE ADDITION U/S 68 AT RS.5,00,000/-. FR OM GOING THROUGH THE SUBMISSIONS OF LD. AR WE OBSERVE THAT THE AMOUN T OF RS.5,60,500/- STOOD AS ADVANCE IN THE BALANCE SHEET SINCE LAST MANY YEARS BEING GIVEN TO ONE MR. MOHAN KRUSHNA BHOIRE F OR ACQUIRING RIGHTS OVER A PIECE OF LAND SITUATED AT NANDIVALI G AM IN DOMBIVALI (EAST) OF DISTRICT THANE IN THE STATE OF MAHARASHTR A. FURTHER WE OBSERVE THAT AFTER A LAPSE OF AROUND 15 YEARS ASSES SEE IS CLAIMING THAT AN AMOUNT OF RS.5,00,000/- (BY WAY OF TWO ACCO UNT PAYEE CROSSED CHEQUES OF RS.2,50,000/-) HAS BEEN RECEIVED FROM M/S PANNA ENTERPRISES WHO AGREED TO TAKE OVER THE RIGHT S OF THE SAID PLOT ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 5 OF LAND WHEN THE ASSESSEE WAS UNABLE TO TAKE OVER F ROM MR. MOHAN KRUSHNA BHOIRE. WE FURTHER OBSERVE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE COULD NOT PLACE ANY DETAIL ABOUT THE CHEQUES RECEIVED FROM M/S PANNA ENTERPRISES AND IT WAS ONLY DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE F IRST APPELLATE AUTHORITY THAT ASSESSEE PLACED A CERTIFICATE DATED 10.1.2011 FROM M/S PANNA ENTERPRISES (AS PLACED AT PAGE 157 OF THE PAP ER BOOK) TO SUPPORT HIS CONTENTIONS THAT THE AMOUNT OF RS.5,00, 000/- HAS BEEN RECEIVED FROM M/S PANNA ENTERPRISE ON BEHALF OF MR. MOHAN KRUSHNA BHOIRE. HOWEVER, LD. AR COULD NOT REPLY TO THE QUES TION POSED BY US ABOUT ESTABLISHING CONNECTION WITH MOHAN KRUSHNA BH OIRE WITH M/S PANNA ENTERPRISE AND ANY DOCUMENTARY EVIDENCE TO SH OW THAT THE AMOUNT WAS PAID TO MOHAN KRUSHNA BHOIRE FOR ACQUIRI NG RIGHTS OVER THE IMPUGNED LAND. ASSESSEE ONLY TRIED TO CONVINCE THE FIRST APPELLATE AUTHORITY BY PROVIDING FRESH EVIDENCE WHICH IS POST DATED THE DATE OF ASSESSMENT ORDER, WHICH WAS NOT EVEN ENTERTAINED BY THE FIRST APPELLATE AUTHORITY AS NO REQUEST WAS MADE FOR ADMI SSION OF ADDITIONAL EVIDENCE ON THIS ISSUE. 10. WE, THEREFORE, ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY SUSTAINED THE DISALLOWANCE AS ASSESSEE WAS UNABLE T O CONNECT THE TRANSACTION MADE 15 YEARS BACK WITH MOHAN KRUSHNA B HOIRE WITH THE AMOUNT OF RS.5,00,000/- RECEIVED FROM M/S PANNA ENT ERPRISE. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. THIS GROUND OF ASSESSEE IS DISM ISSED. ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 6 11. NOW WE TAKE UP GROUND NO.2 OF ASSESSEES APPEAL WHICH READS AS UNDER :- 2. CONFIRMING THE DISALLOWANCE OF RS. 15,42,771/-, ORIGINALLY MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES 1962. ON FACTS OF THE CASE, HE OUGHT TO HAVE APPRECIATED THAT SINCE THE CORRESPONDING EXPENDITURE WAS NOT CLAIMED AS DEDUCT ION AT ALL, THE QUESTION OF INVOKING THE PROVISIONS OF SECTION 14A SO AS TO DISALLOW THE SAME CLEARLY DID NOT ARISE. 12. AT THE OUTSET LD. AR SUBMITTED THAT LD. ASSESSI NG OFFICER ERRED IN MAKING DISALLOWANCE AND SO WAS LD. CIT(A) IN CONFIR MING THE DISALLOWANCE WITHOUT APPRECIATING THE FACT THAT ASS ESSEE HAS NOT CLAIMED ANY EXPENDITURE OF INTEREST AGAINST THE TAX ABLE INCOME. LD. AR REFERRED TO THE PAPER BOOK DATED 29.4.2016 AT P AGE 5 SHOWING CAPITAL ACCOUNT FOR FY 2007-08 AND SUBMITTED THAT T HE INTEREST OF RS.1,695,270.91 IS A MERE DEBIT TO THE CAPITAL ACCO UNT AND NO DEDUCTION HAS BEEN CLAIMED UNDER ANY HEAD OF INCOME WHILE COMPUTING TOTAL INCOME. LD. AR FURTHER SUBMITTED TH E QUESTION OF INVOKING PROVISIONS OF SEC.14A OF THE ACT AND APPL YING METHOD GIVEN IN RULE 8D OF THE RULES CLEARLY DID NOT ARISE IN TH E CASE OF ASSESSEE. IN THE GIVEN FACTS AND CIRCUMSTANCES THERE IS NO FI NDING ON RECORD THAT ASSESSEE HAD IN FACT INCURRED SOME EXPENDITURE FOR EARNING EXEMPT INCOME WHICH COULD NOT BE SEGREGATED BY ANY OTHER M ODE. LD. AR REFERRED AND RELIED ON THE DECISIONS OF THE CO-ORDI NATE BENCH KOLKATA IN THE CASE OF REI AGRO LTD. VS. DCIT (2013) 35 TAX MANN.COM 404, AND CO-ORDINATE BENCH, MUMBAI IN THE CASE OF ITO VS . RELIANCE SHARE & STOCK BROKERS (P) LTD. (2014) 51 TAXMANN.CO M 215 (MUMBAI-TRIB). ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 7 13. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER O F LD. CIT(A) WHEREIN THE DISALLOWANCE WAS CONFIRMED BY OBSERVING AS FOLLOWS :- 6.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A . R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER. AT PARA-8 OF THE ASSESSMENT ORDER, AO OBSERVED THAT APPELLANT RE CEIVED DIVIDEND OF RS,36,540/-WHICH IS EXEMPT INCOME AND ACCORDINGLY, HE MADE THE DISALLOWANCE U/S.14A IN -ACCORDANCE WITH RULE 8D. . THE CONTENTIONS OF THE LEARNED AR ARE THAT APPELLAN T DID NOT INCUR ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME; AO DID NOT COME TO ANY DEFINITE FINDING THAT EXPENDITURE WAS INCURRED FOR EARNING E XEMPT INCOME AND WITHOUT SUCH SATISFACTION APPLYING RULE 80 MECHANICALLY IS NOT IN ACCORDANCE WITH LAW. IN THIS CONNECTION, IT IS SEEN THAT DURING, THE ASS ESSMENT PROCEEDINGS CRYPTIC EXPLANATION IN ONE LINE WAS FURNISHED BY THE APPELL ANT. EVEN DURING THE APPELLATE PROCEEDINGS, IT IS NOT THE CONTENTION OF THE APPELL ANT THAT THE INVESTMENTS EARNING EXEMPT INCOME WERE MADE OUT OF OWN FUNDS SO AS NOT TO ATTRACT THE PROVISIONS OF SECTION 14A, THEREFORE, IMPUGNED DISALLOWANCE IS UP HELD. THIS GROUND OF APPEAL IS DISMISSED. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. ASSESSEE IS AGGRIEVED WITH LD. CI T(A)S ORDER CONFIRMING DISALLOWANCE OF RS.15,42,771/- BY INVOKI NG PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE RULES. W E FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDING LD. ASSESSING O FFICER OBSERVED THAT ASSESSEE HAS EARNED TAX FREE DIVIDEND OF 38,54 0/- AND HAS INCURRED INTEREST EXPENDITURE OF RS.16,95,270/- AND ASSESSEE HAD ALSO MADE AVERAGE INVESTMENT OF RS.3,68,27,320/-. A CCORDINGLY LD. ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 14A OF THE ACT AND BY APPLYING RULE 8D CALCULATED DISALLOWANCE AT RS.15,4 2,771/-. FURTHER FROM GOING THROUGH THE COMPUTATION OF INCOME ALONG WITH BALANCE SHEET AND CAPITAL ACCOUNT PLACED AT PAGE 1 TO 6 OF THE PAPER BOOK DATED 29.4.2016 WE OBSERVE THAT ASSESSEES MAIN SOU RCE OF INCOME IS SPECULATION, DEEMING PROFIT U/S 44AD CAPITAL GA IN AND INCOME FROM ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 8 OTHER SOURCES. AS PER THE CAPITAL ACCOUNT, WE FIND THAT ASSESSEE HAS NOT CLAIMED THE INTEREST EXPENDITURE OF RS.16,95,27 0/- AGAINST ANY TAXABLE INCOME AND RATHER IT IS A MERE DEBIT TO THE CAPITAL ACCOUNT. FURTHER PROVISIONS OF SECTION 14A OF THE ACT CAN BE INVOKED WHEREIN EXPENDITURE HAS BEEN ALLOWED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. MORE PRECISELY SECTI ON 14A(1) CONTEMPLATES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. IN OUR VIEW ONCE THE ASSESSEE FALLS UNDER SECTION 14A(1) OF THE ACT THEN ONLY THE PROCESS STARTS FOR THE DETERMINATION OF DISALLOWANCE U/S 14A OF THE AC T. HOWEVER, IN THE GIVEN FACTS OF THE CASE WE FIND THAT ASSESSEE HAS N OT CLAIMED ANY EXPENDITURE AT ALL UNDER ANY HEAD WHICH CAN HAVE AN ELEMENT IN THE NATURE OF CLAIMING EXPENDITURE AGAINST TAXABLE INCO ME. NO SUCH SPECIFIC FINDING HAS BEEN RECORDED BY THE REVENUE A ND, THEREFORE, IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT NO DISA LLOWANCE IS CALLED FOR U/S 14A OF THE ACT. WE ACCORDINGLY SET ASIDE TH E ORDER OF LD. CIT(A) AND DELETE THE DISALLOWANCE OF RS. 15,42,771 /- AND ALLOW THE GROUND OF ASSESSEE. 15. NOW WE TAKE UP REVENUES APPEAL RAISING SOLITAR Y GROUND AGAINST THE ORDER OF LD. CIT(A) DELETING ADDITION O F RS.76,50,000/- MADE U/S 69 OF THE ACT. 16. BRIEF FACTS RELATING TO THIS GROUND ARE THAT ST OCK STATEMENT OF SHARES AS APPEARING IN THE BOOKS OF ACCOUNT WERE EX AMINED AND CROSS VERIFICATION AGAINST THE DMAT STATEMENT OF F .Y.2007-08 WAS ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 9 MADE AND THEREAFTER SOME DISCREPANCIES WERE FOUND I N RESPECT OF SHARES OF UNITECH LTD. NECESSARY REPLY WAS SUBMIT TED BY ASSESSEE SHOWING COMPLETE DETAILS OF UNITTECH SHARES PURCHAS ED, PLEDGED TO OTHER PARTIES AGAINST LOANS TAKEN, PLEDGED SHARES R ECEIVED BACK AS WELL AS DETAILS OF BONUS SHARES RECEIVED ON THE SHA RES OF UNITECH LTD. HELD BY THE ASSESSEE. HOWEVER, LD. ASSESSING OFFICE R OBSERVED THAT ON 1.10.2007 THAT THERE WAS NO NET NEGATIVE BALANCE OF 18,000 OF EQUITY SHARES ACCORDINGLY TAKING THE PRICE AT RS.42 5/- PER EQUITY SHARES ON 1.10.2007 AND MULTIPLYING IT WITH 18,000 UNITECH SHARES AN ADDITION OF RS.76,50,000/- WAS MADE U/S 69 OF THE A CT ON ACCOUNT OF UNEXPLAINED INVESTMENT WHEN THE ISSUE CAME UP BEFOR E THE FIRST APPELLATE AUTHORITY THE ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE. 17. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 18. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER BUT COULD NOT CONTROVERT TO THE FINDING GIVEN BY CIT(A). 19. ON THE OTHER HAND, LD. AR VEHEMENTLY ARGUED SUP PORTING THE ORDER OF CIT(A) AND FURTHER REFERRED THE PAPER BOOK AT PAGE 10 TO 19 REFERRING TO THE RECONCILIATION OF SHARES OF UNITEC H TRANSACTION CUM HOLDING STATEMENT OF UNITECH LTD. AND ACCOUNT OF UN ITECH LTD. IN THE BOOKS OF ASSESSEE. LD. AR FURTHER REFERRED TO PAGE 25 TO 155 OF THE PAPER BOOK SHOWING LOAN AGREEMENT ALONG WITH CONFIR MATION OF ACCOUNT IN RESPECT OF VARIOUS PARTIES FROM WHOM LOA NS WERE AVAILED BY PLEDGING THE SECURITY IN THE FORM OF SPECIFIC NU MBER OF EQUITY SHARES TO UNITECH LTD. ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 10 20. LD. AR ALSO SUBMITTED THAT ALL THE TRANSACTIONS HAVE BEEN ENTERED THROUGH D. MAT ACCOUNT AND ALSO APPRAISED T HAT ONE CANNOT ENTER IN EQUITY SHARES TRANSACTION OTHER THAN BY D .MAT ACCOUNT AND ALL THE MOVEMENTS OF EQUITY SHARES OF UNITECH LTD. WITH REGARD TO PURCHASE, SALE, SHARE PLEDGE AGAINST LOAN TAKEN AS WELL AS PLEDGED SHARES RETURNED BACK DURING THE YEAR ARE PROPERLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND THE BOOKS TALLIED WITH THE D.MAT STATEMENT. THE ONLY REASON FOR DISALLOWANCE WAS DUE TO ARITHME TICAL MISTAKE COMMITTED BY LD. ASSESSING OFFICER WHILE MAKING REC ONCILIATION STATEMENT AND THE ADDITION WAS MADE ONLY WITH REGAR D TO THE 18000 BONUS SHARES HELD. LD. ASSESSING OFFICER FAILED TO UNDERSTAND THAT BONUS SHARES ARE ALLOTTED TO THE EXISTING SHARE HOL DER ONLY AND THERE IS NO VALUE ATTACHED TO IT AND THEREFORE, COST OF S UCH BONUS SHARES IS TAKEN AT RS.NIL. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. REVENUE IS AGGRIEVED WITH CIT(A) S ORDER DELETING THE ADDITION OF RS.76,50,000/- MADE U/S 69 OF THE A CT. WE FIND THAT ISSUE CENTRES AROUND THE UNEXPLAINED NON-RECONCILIA TION OF STOCK STATEMENT VIS--VIS D.MAT ACCOUNT RELATING TO 18000 EQUITY SHARES OF UNITECH LTD WHICH AS PER ASSESSING OFFICER WAS NOT APPEARING IN THE BOOKS AND ACCORDINGLY APPLYING THE RATE OF RS.425/- PER SHARE AS ON 1.10.2007 IMPUGNED ADDITION OF RS.76,50,000/- WAS M ADE. WE FURTHER OBSERVE THAT ASSESSEE HAS GIVEN ALL NECESSA RY DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO SATISFY THE ASSESSING OFFICER ABOUT THE RECONCILIATION OF EQUITY SHARES O F UNITECH LTD. WHICH ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 11 WERE HAVING A REGULAR FLOW IN AND OUT OF THE D.MAT ACCOUNT OF ASSESSEE ON ACCOUNT OF PURCHASE, SALE, PLEDGING OF SHARES AGAINST LOAN TAKEN AND RECEIVED BACK THE PLEDGED SHARES ONC E LOAN IS PAID AND ALSO THE ACCOUNTING OF BONUS SHARES. WE FIND TH AT LD. CIT(A) HAS ALSO APPRECIATED THE DETAILS GIVEN BY ASSESSEE AND HAS DELETED THE IMPUGNED ADDITION BY OBSERVING AS FOLLOWS :- 7.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A . R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. VIDE PARA-9 OF THE ASSESSMENT ORDER, THE AO OBSERVED THAT INVESTMENT I N 18000 UNITECH SHARES AS ON 1-10-2007 REMAIN UNEXPLAINED; AND TAKING RS.425/- A S THE UNIT PRICE, ADDITION OF RS,76.5 LAKHS WAS BEING MADE. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS CONTENDED THAI WHILE CARRYING OUT THE RE-CONCILIATI ON OF SHARES (AT PAGE 10 OF THE ASSESSMENT ORDER) CERTAIN MISTAKES WERE MADE BY THE AO; IF THESE MISTAKES ARE TAKEN CARE OF, THERE WOULD BE NO NEGATIVE FIGURE AN D NO SCOPE FOR ADDITION. ALL THE TRANSACTIONS IN SHARES WERE ROUTED THROUGH THE DE-M AT ACCOUNT. THE BONUS SHARES ALLOTTED ON THE PLEDGED SHARES GOT REFLECTED IN THE DE-MAT ACCOUNTS OF THE PERSONS (WITH WHOM THE SHARES WERE PLEDGED BY THE A PPELLANT), AND SOME OF THOSE BONUS SHARES GOT TRANSFERRED BACK TO THE APPE LLANT ON HIS DISCHARGING THE LIABILITIES; THUS THERE WAS NO UNEXPLAINED INVESTME NT IN SHARES. REMAND REPORT WAS CALLED FOR ON THE ISSUE. AS SEEN THEREFROM, AO REPRODUCED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER BUT FAILED TO CONTROVE RT THE CONTENTIONS OF THE APPELLANT. THE REMAND REPORT IS SILENT ON THE ISSUE OF BONUS SHARES. THEREFORE, IMPUGNED ADDITION IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 22. FROM GOING THROUGH THE ABOVE FINDING OF LD. CIT (A) AS WELL AS DETAILS FILED IN THE FORM OF PAPER BOOK FROM PAGE 1 0 TO 155, WE FIND THAT ASSESSEE HAS BEEN ABLE TO FULLY DEMONSTRATE TH E RECONCILIATION OF THE EQUITY SHARES OF UNITECH LTD. IN THE BOOKS OF A CCOUNT WITH THE ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 12 HOLDING UNITECH SHARES IN THE D.MAT ACCOUNT. THE ON LY REASON FOR THE IMPUGNED ADDITION RELATING TO 18000 BONUS SHARES RE CEIVED ON THE EQUITY SHARES HELD BY ASSESSEE OF UNITECH LTD. WE OBSERVE THAT BONUS SHARES ARE ALLOCATED THROUGH A REGULATED SYST EM OF THE COMPANY AND ARE BEING ISSUED TO THE EXISTING SHAREH OLDERS AND ONE CANNOT MAKE A CHANGE AT HIS OWN BEHEST AS THE SYSTE M WORKS IN AUTOMATIC MODE AND BONUS SHARES ONCE ISSUED BY THE COMPANY AUTOMATICALLY FALLS IN THE CONCERNED D.MAT ACCOUNT OF THE EXISTING SHARE HOLDER. WE ARE, THEREFORE, OF THE VIEW THAT N O DISALLOWANCE WAS CALLED FOR AT RS.76,50,000/- U/S 69 OF THE ACT AND AS SUCH NO INTERFERENCE IS CALLED IN THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 21. OTHER GROUNDS ARE OF GENERAL NATURE WHICH NEED NO ADJUDICATION. 22. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 11/11/2016 MAHATA/- ITA NO. 161 & 533/AHD/2012 ASST. YEAR 2008-09 13 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 9/11/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 11/11/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 15/11/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: